CIMB Research retains Add for Bermaz Auto

  • Auto
  • Wednesday, 14 Jun 2017

CIMB Research expects Mazda Malaysia, which is 30%-owned by Bermaz, to record stronger earnings growth from FY18 onwards.

KUALA LUMPUR: CIMB Equities Research is maintaining its Add for Bermaz Auto with a slightly lower RM2.15 target price, still based on 13 times CY18F price-to-earnings (P/E) (three year historical mean). 

It said on Wednesday that the successful new model launches and higher dividend payouts are potential re-rating catalysts. 

“Key downside risks to our call are the depreciation of the ringgit against the yen and prolonged weakness in consumer sentiment,” it said.

CIMB Research said that revenue in 4QFY4/17 fell 34% year-on-year to RM354mil, mainly due to lower sales volume in both Malaysia and the Philippines, which dropped by 37% and 9%, respectively. 

“Management attributed the weaker sales to softer consumer demand and intense competition in Malaysia. 

“Overall, core net profit fell 58% to RM21.5m due to margin compression from currency weakness and lower average selling prices due to the CX-5 run out programme as more sales incentives were given ahead of the new model slated for September 2017,” it said.  

The research house said revenue in FY17 slid 21% year-on-year due to lower sales in Malaysia (-30%) and the Philippines (-12%). 

Total sales volumes fell 25% year-on-year to 14,736 units due to declines across all models except for the CX-3, which showed 18% year-on-year growth to 1,649 units. 

“Overall, FY17 core net profit fell by 38% year-on-year due to lower sales volume and margin compression from higher opex following the depreciation of the ringgit against the Japanese yen,” it said.

Following the decline in net profit, it declared a lower total dividend of 11.7 sen vs. 16.9 sen in FY16.  

CIMB Research cut its FY18-19F EPS forecasts by 5%-9% to account for lower volume growth due to prolonged softness in domestic consumer sentiment and forex volatility. 

“However, we project an 18% volume growth in FY18F on new model launches. 

“We expect stronger earnings recovery in FY18F and beyond, with the introduction of new models like the new CX-5 and CX-9 CKD units, and stronger contributions from the Philippines operations. 

“Nevertheless, we are encouraged to see improving performance from its associates, which posted a higher profit of RM14mil in FY17 (vs. RM11.4mil in FY16). 

“We expect Mazda Malaysia (MMSB), which is 30%-owned by Bermaz, to record stronger earnings growth from FY18 onwards, driven by Mazda’s strategy to grow its annual sales in Asean from 100,000 in March 2017 to 150,000 in 2019. 

“MMSB plans to double its production capacity from 18,000 to 35,000 units per year following the completion of the new paint shop this year.         

“The group plans to list Bermaz Auto Philippines (BAP) in 1QCY18, instead of 1HCY17, due to the excise tax issue. 

“However, we understand that it plans to re-submit the application to the Philippines Stock Exchange in 2HCY17. 

“To recap, the group expects to raise about RM82mil from the BAP listing to fund its expansion in the Philippines,” said CIMB Research.   
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